Nonlinear Structural VAR modelling of East European Economies

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Obiettivo

The principal aim of the project is to develop a new econometric modelling technique, vector autoregressive (VAR) modelling with bilinear error corrections, and apply to the modelling of economies in the period of transition, where only short data series are available. This principal aim can be expressed by 4 specific objectives:To develop the foundations of nonlinear structural vector autoregressive (NS-VAR) modelling;To formulate a macroeconomic model which is appropriate for modelling an economy during the transition period;To develop and apply appropriate simulation and estimation methods which will be used for the NS-VAR modelling using only short time series of data;To apply the results of the above for constructing an empirical NS-VAR model for Russia and Ukraine, estimating it evaluating its simulation and forecasting properties and to prepare final output.

There will be two research teams from the NIS countries: from St. Petersburg State University (Russia) and Kiev National University (Ukraine). The INTAS countries are represented by one team from the University of Leicester (United Kingdom) and one from the National Institute for Statistics and Economic Studies (INSEE) in Paris (France). The project is scheduled for 34 months and its realisation is divided into three phases, which generally correspond to the period of the development of the theoretical NS-VAR model, calibration for the initial values of parameters and finally estimation, simulation and economic policy analysis.

Generally, the project's contribution to knowledge is expected to be the following:A nonlinear VAR model with a bilinear error correction mechanism will be proposed. This will constitute advancement in the theory of nonstationary and nonlinear econometric modelling;Estimation algorithms for the RSG estimation of such a model will be prepared. This will be advancement in the theory of global optimisation and econometric estimation;A small size empirical macroeconomic NS-VAR model with bilinear error correction mechanisms will be developed, estimated and simulated. This will be advancement in applied macroeconomic modelling and the analysis of East European economies in transition.